OMV terminates gas contract with Gazprom

Die OMV has signed a long-term gas supply contract with the Russian company with immediate effect Gazprom terminated. This means that OMV no longer has any supply contracts with Gazprom and no longer has any business activities in Russia, according to a statement from the company on Wednesday evening.

OMV accuses Gazprom of “several fundamental breaches of contract”. In particular, Gazprom stopped supplying gas to OMV on November 16th.

The delivery quantities are “diversified through alternative gas sources”

OMV Chief Alfred Stern emphasized in the broadcast that his company now sources gas from its own gas production in Norway and Austria, from external gas producers and as liquefied natural gas (LNG). OMV’s gas storage facilities in Austria are currently around 85 percent full.

“OMV is able to fulfill all customers’ contracts from alternative gas sources,” emphasizes Stern. The delivery volumes were “diversified by alternative gas sources” and only brought small margins “in the single-digit million range”.

OMV’s risk potential decreased

“The termination of the Austrian supply contract with Gazprom Export significantly reduces the potential risk profile of OMV Gas Marketing & Trading (OGMT),” said Stern. OMV was under massive pressure to reduce or discontinue its business with Russia, but was unable to do so because of the long-term obligations under the gas supply contract. The contract stipulated an obligation to pay for gas delivered even if it was not needed.

The terminated contract dated from 2006 and was supposed to run until 2040. He was celebrated by politicians when he graduated, but then came under criticism because of his long-term nature and conditions. Before the delivery stop by the Russian suppliers, OMV received around 7,400 MWh per hour at the Austrian-Slovak border, writes OMV. This corresponded to around 5 TWh per month. For comparison: Austria’s gas consumption in 2023 was around 75 TWh, before the Ukraine war it was almost 100 TWh.

Arbitration court as the trigger for the developments

Gazprom’s delivery stop did not come out of the blue. The developments were triggered by an arbitration award that awarded OMV €230 million in damages against Gazprom. OMV then deducted this amount from its payments to Gazprom. Gazprom, in turn, took this as an opportunity to stop its deliveries to OMV.

All developments should also be seen from the perspective that Russian gas deliveries via pipeline are threatened to end on January 1, 2025, as Ukraine does not want to extend the contract for deliveries across its territory. It is still unclear whether gas will actually stop flowing from January 1st.

Nehammer, Gewessler: Austria cannot be blackmailed

“Russia wanted to use energy as a weapon against us – that didn’t work. Gazprom didn’t stick to the contracts, so OMV is immediately ending the contract, which was supposed to run until 2040. Our energy supply is secure because we are well prepared. Austria cannot be blackmailed,” writes the Chancellor Karl Nehammer (ÖVP) in an initial reaction on Wednesday evening.

For climate minister Leonore Gewessler (Greens), OMV’s termination of the long-term Gazprom contract is a “necessary step towards our country’s energy independence.” This will end Austria’s decades-long dependence on Russian energy. “This decision poses no threat to security of supply in Austria,” assures Gewessler. “Austria can no longer be blackmailed with Russian gas deliveries.” For the gas suppliers, however, the following now applies: “Customers must under no circumstances bear the additional costs for this expected change.”